With the October 1 start of the fiscal year only weeks away, preventing a government shutdown should top the agenda for returning lawmakers. A stopgap funding bill that provides the House and Senate more time to pass a full-year budget for fiscal 2025 after the November elections appears the most likely solution. Challenges remain, however, as demonstrated by House Speaker Mike Johnson’s failure last Wednesday to secure enough support for a legislative package whose proposed continuing resolution would last until March 28.
It’s just as well that the bill was taken down, by Democratic and GOP opposition to the length of the CR and other parts of the package. Delaying passage of the 2025 budget until well into the new calendar year would create a toxic combination of fiscal decisions that could poison the national-security outlook for the next administration, no matter who wins the presidency. The best option at this point is a short-term continuing resolution that avoids a government shutdown and gives the House and Senate a November or December deadline to negotiate and pass appropriations. Getting there will require bipartisan support and the commitment of both parties’ leadership.
The Pentagon is no stranger to operating under continuing resolutions. It has started 14 of the last 15 years in financial limbo, including the most recent fiscal years featuring presidential elections (2013, 2017, and 2021), during which continuing resolutions for defense funding lasted until March, May, and December, respectively.
While continuing resolutions of two to three months may not significantly disrupt defense acquisition and operations, longer ones can seriously hinder them, as Defense Secretary Lloyd Austin recently wrote to Congressional leaders. Long delays interfere with program execution and force Pentagon offices to rapidly burn through their budgets in the few remaining months of the fiscal year before it expires, contributing to waste and inefficiencies. These concerns prompted opposition to Speaker Johnson’s plan from defense hawks within his own party.
Punting appropriations until a new administration and Congress take office as Johnson proposed is not only harmful to the Pentagon and politically risky; this time it also threatens to tie defense spending to a toxic brew of fiscal issues that must be resolved in the new calendar year. The list includes dealing with the debt ceiling, expiring tax cuts, emergency funding for Ukraine and Israel, and the next budget request from the new administration. And while Congress attempts to grapple with these issues, the military will be fiscally strained under a continuing resolution, unable to start new modernization programs, increase production rates of key munitions, and keep pace with the growing threats posed by China, Russia, and the crises in the Middle East and Ukraine.
The first issue the next Congress will face in 2025 is the debt ceiling. It was suspended under the terms of the Fiscal Responsibility Act agreed between President Biden and then-Speaker Kevin McCarthy in 2023, but it will come back into force on January 1. The Treasury Department will then have to take “extraordinary measures” to temporarily prevent the government from defaulting on its debt, but it is unclear how long extraordinary measures would allow the government to function this time. During the last debt-ceiling crisis in 2023, the Treasury projected that the government could continue to operate under extraordinary measures from January, when it hit the debt ceiling, to early June.
The last two standoffs over the debt ceiling ended in deals that set arbitrary budget caps for defense and non-defense discretionary funding in exchange for increasing or suspending the debt limit. The Budget Control Act of 2011 set caps on the defense budget that would have cut roughly $1 trillion over a decade from the spending proposed by President Obama, but Congress later passed a series of deals that raised the caps. The more recent standoff that culminated in May 2023 led to the passage of the Fiscal Responsibility Act, which resurrected budget caps and the threat of sequestration for defense and non-defense programs in FY 2024 and FY 2025. Passing a continuing resolution until March makes it more likely that a deal on 2025 funding—and, potentially, funding for future years—will be linked yet again to debt-ceiling negotiations.
The expiration of tax cuts passed under the Trump administration adds another complicating ingredient to this fiscal concoction. While the tax cuts don’t actually expire until the end of 2025, both Republicans and Democrats are gearing up for a fight in the new Congress over which provisions to extend, refine, or sunset. Extending all the tax cuts would add some $4 trillion to the debt over the next ten years, not including debt-servicing costs. Tax cuts—no matter how important or popular they may seem at the time—lead to more downward pressure on the defense budget in the long run as they drive up the deficit and compel fiscal hawks to cut government spending to compensate.
Punting on the budget until March could lead Congress to seek a grand bargain that combines 2025 spending, the debt ceiling, and tax cuts—something that could take months more to negotiate when we will already be halfway through the fiscal year. Moreover, the Fiscal Responsibility Act mandates that if any part of the government is still funded under a continuing resolution by April 30, the defense and non-defense budgets will revert to 2023 spending levels minus 1 percent. For defense, that means an across-the-board cut of 5 percent at a perilous time when stocks of key munitions are running low, modernization programs needed to deter China and Russia are at critical points in their development, and the military is repelling near-daily attacks in the Middle East. Congress should consider carefully the message this would send to adversaries around the world if it lets sequestration happen.
Both parties in Congress will have to put political machinations aside to ensure that national security is adequately funded this upcoming fiscal year. Some GOP deficit hawks oppose passing any continuing resolution, so a bipartisan coalition will be needed to avoid a government shutdown that would have devastating effects on defense and the government at-large. A palatable agreement for Democrats and most Republicans could see a stopgap funding bill passed until November or December to provide enough time to pass appropriations for the entire government before the end of the calendar year and avoid sequestration. Too many other contentious fiscal issues are already waiting for Congress in 2025. There is no need to make the defense budget a part of those fights.
Seamus P. Daniels is a fellow for Defense Budget Analysis at the Center for Strategic and International Studies. Todd Harrison is a senior fellow at the American Enterprise Institute.
Comments are closed.